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Tandleman's Beer Blog - Too Many Breweries?

Amid all the heat generated by Cloudwater's decision to abandon cask beer, one or two key points started to emerge. Firstly there was a not wholly - well maybe by no means - accepted allegation that certain brewers cannot make money out of selling cask beer and a secondary and sort of glossed over one that links to it, is that there are too many breweries seeking too few accounts.

Now let's start with the first one and its ancillary argument that cask beer is more expensive to produce. Well that does kind of fly in the face of what has been going on since keg beer was invented. Since that point, keg beer - or rather brewery conditioned beer - whether it be from kegs or tanks has always been more expensive. Where the two are sold side by side keg beer is always more expensive. If it is proprietary lager or a national brand, it has always been more expensive and it still is. Who can doubt that? Just go into any pub and see for yourself. I don't intend to go into the many variables that change that for individual breweries, but these will include, ingredients, kit, how tight the operation is run on one side and on the other side, to whom and where he or she sells their beer and for how much. Neither list is exhaustive. Is there a degree of tradition in this? A kind of hangover from the past? I sort of doubt it. Keg beer was more expensive when we had the big six brewers and they didn't do that for no good reason. It simply cost them more to make it. It is only traditional in the sense that it has always been like that - but for a good reason.

Does that still apply nowadays? Well yes it does and some reckon it shouldn't. The argument goes roughly "if cask is a premium products, then why doesn't it command a higher price?" Superficially one might agree, but it doesn't take long to demolish the argument. Cask beer per se isn't a premium product though some cask undoubtedly is. Some is more or less commodity and some is in between. Also there is no guarantee that what you buy will be sold in the sort of condition that would command a supplement. (In fact a lot of keg beer on presentation alone, shouldn't command a premium either but that's a different argument.) Cask beer is a much more perishable product than keg. It has to be "priced to go". If you want to see the argument taken apart, read this from Phil's Blog. Special pleading by breweries who reckon their operation is different/ better/more exclusive don't cut much ice with Phil or indeed me. This kind of sums it up for me: " Not, that is, unless I can persuade a substantial number of punters that I should be able to make cask beer in precisely the way I want to, and that this is important enough to make it worth paying more for my beer. But that’s a really hard sell; mostly punters (and publicans) are liable to take the view that beer is beer, and that the world doesn’t owe anybody a living. Not because they’re evil or selfish or brainwashed, but because that’s how selling stuff in a free market, and the rationality the market is based on, work."

I'd contend that is a persuasive point and that attempts to artificially raise the price of cask beer are doomed to failure. Thus it is that certain breweries look for a way round this by using their capacity to produce higher margin keg or - even better - small package beer - as this market is far less congested and margins still exist. This has legs - in the short term at least - as this is a less congested market.
So back to the other side of this which is alleged over supply is pushing prices down. There must be a degree of truth in this, but there are several flies in this ointment. Even if we shake out some breweries, we can't guarantee to shake out the right ones. You only need to read Dave Bailey's Blog here to understand that isn't likely to happen. Nobody would suggest Dave is a bad brewer, but he is seemingly in a bad place. In the meantime, all the hobby brewers, regionals and nationals will undercut him and others. With nearly 2000 breweries, just how many would need to go to make the market a better place? Even if a third went, would that guarantee anything? I doubt it. On the keg side there are uncomfortable times ahead. The big boys, using the craft beer companies that they have purchased are sniffing around. The multi nationals are loan tying lines left, right and centre. Strikes me things will get worse unless you really know your business, your market and your customers. One thing is sure. If you don't have a reputation for great beer, you are likely to be in trouble of some kind. Sadly, even if you do have such a reputation, there is no guarantee you'll survive.

Are there too many breweries? Probably. Would many fewer solve the underlying problems of brewing beer profitably in the UK? Probably not. Beer wise, we live in interesting times.As I started to write this, I realised I was tying myself in knots, so this is a truncated version just to get the main points across.Please take the survey which is simple enough. I was going to do a binary choice of yes/no until I realised I don't really know myself.